The world of finance is expansive and ever-changing, with a new Union Budget announced every financial year that compels people to rethink their fiscal decisions. This year, the year 2020, is no different. Whether it be accumulating savings or making investments, your personal financial goals and practices are bound to be in need of an update.
Therefore, to ensure that you make the most prudent financial decisions this new year, here are few financial resolutions that you must consider.
- Figure out taxes before time While it is important to focus on wealth creation, it is perhaps most important to make sure that you establish yourself as a tax-compliant citizen first. From the financial year 2017-2018, there have been certain penalties put into place for late filing of income tax returns. Depending on which late payment window you fall under, your fines can range as high as Rs. 5,000 and Rs. 10,000 (if your total income is above Rs. 5 lakhs). Moreover, late tax payment can attract an interest rate of 1% per month on the amount of unpaid tax, under Section 234A. Therefore, this year, make sure to put planning out your taxes ahead of time on your list of financial resolution
- Create or supplement your emergency fund There are certain financial uncertainties that one can prepare for. But for all other unexpected unfortunate financial circumstances, one needs a financial backup to help sail you through. Whether it be the sudden loss of a job or an impending recession, it is at all times prudent to have an emergency fund at hand to help support your or your family’s financial needs. If you do not have one already, let the creation of an emergency fund be on your financial resolutions this year. This emergency fund should be in an instrument that is as accessible and liquid as possible, such as in a savings account created for the purpose. It is widely recommended that the size of your emergency fund be approximately six months of your and/or your family’s monthly expenses.
- Keep a check on your credit In today’s age, especially with the advent of technology, availing credit has become easier than ever. As a result, making payments via credit cards or one of the various types of loans in the market, is not uncommon. However, it is important to remember that your every request for credit and payment related to credit is reflected in one’s credit score. This credit score established your trustworthiness as a borrower and can be the crucial difference between whether your future loan requests get approved or not. So, make sure to keep a close eye on your credit score and ensure that your credit-related payments are always made on time.
- Find or develop a suitable financial plan for yourself Most of us tend to do fairly well when it comes to the simple matters of paying off monthly bills, depositing money in savings and contributing to a standard investment instrument. But at the end of the day, you could still be lacking an overall financial plan that could help you achieve your financial goals in the short-term and long-term future. So, this year, make the financial resolutionto develop a proper financial plan that can help you achieve more with your finances. Alternatively, you could follow the time-tested rule of a 50-30-20 financial plan whereby 50 % of your earnings after tax are used for necessities, 30 % towards luxuries and 20% towards savings and investments.
- Do not be swayed by market fluctuations For a long time in India, financial markets were considered a risky avenue to invest in. This opinion seems to be changing in recent times, however, with an increasing number of Indians prudently investing their money in opportunities such as the stock and forex markets.However, new investors can sometimes get swayed by small price movements or hedge their bets on a temporary trend. Therefore, if you too are a new investor, it is best to keep in mind that market investments should be made after sufficient research and considerations. It is in the nature of the market to witness frequent fluctuations, but not every fluctuation presents an opportunity.